AMP Ameriprise Financial
Capital-light wealth franchise; buybacks inflate ROE, and the depressed book base makes residual income understate value.
The story
Ameriprise is a capital-light wealth manager: its advisor network (about $1T+ in client assets) earns fee-based, recurring revenue, alongside asset management and a smaller retirement/protection insurance book. The trailing 60% ROE comes from a book that aggressive buybacks (about 85% of earnings returned) and AOCI unrealized losses have shrunk, so it is structural rather than a cyclical peak. It is still exposed to equity markets and to rate-driven spread income, which is near a high point as rates ease.
I normalize ROE down from 60% to 48% to allow for lower cash-sweep and spread income as rates fall, and for a market drawdown hitting fee assets, while keeping the high-return wealth franchise. Book growth stays low because most earnings go to buybacks. Beta 1.2 reflects its sensitivity to equity markets.
Value drivers
| Return on equity (normalized) | 25.0% |
| Book-value growth (Y1) | 6.0% |
| Terminal book growth | 3.0% |
| Beta | 1.20 |
| Failure probability | 1.0% |
| Cost of equity | 10.7% |
Valuation bridge
| PV of excess returns | 4.16B |
| PV of terminal excess | 953.16M |
| Equity value | 11.54B |
| ÷ shares → per share | $130.69 |
Projected excess returns on equity
| Yr | Book equity | ROE | Excess return | PV |
|---|---|---|---|---|
| 1 | 6.55B | 25.0% | 935.79M | 845.25M |
| 2 | 6.94B | 23.6% | 897.15M | 731.95M |
| 3 | 7.34B | 22.3% | 847.82M | 624.79M |
| 4 | 7.73B | 20.9% | 787.54M | 524.21M |
| 5 | 8.11B | 19.5% | 716.14M | 430.57M |
| 6 | 8.49B | 18.2% | 633.61M | 344.10M |
| 7 | 8.86B | 16.8% | 540.10M | 264.93M |
| 8 | 9.21B | 15.4% | 435.89M | 193.13M |
| 9 | 9.55B | 14.1% | 321.46M | 128.65M |
| 10 | 9.87B | 12.7% | 197.40M | 71.36M |
Key risks
- Equity market drawdown cuts AUM-based fees and advisor productivity
- Falling rates compress cash-sweep and certificate spread income
- Regulatory or legal pressure on advisor cash-sweep economics and on annuity/LTC reserves
Catalysts
- Continued advisor recruiting and wrap-account net inflows lifting recurring fees
- AOCI reversal as rates fall rebuilds book while buybacks shrink the share count